Why "Human in the Loop" Scenario Planning is Key for Efficient Trade Promotions

Trade promotions are key to your consumer packaged goods (CPG) success and revenue growth. However, planning and executing these promotions isn’t easy and requires a clear understanding of current trends and consumer behavior. This is where scenario planning becomes crucial.

Scenario planning involves creating multiple potential future scenarios to better prepare for market uncertainties. When combined with artificial intelligence (AI) and machine learning (ML), scenario planning becomes a more effective and speedy tool for enhancing trade promotion strategies. This combination leads to a more detailed and data-driven approach, transforming guesswork into strategic, fact-based planning.

This allows decision-makers to foresee different market situations, consumer reactions, and competitor moves, helping them develop flexible and robust strategies with quantified predictive results. Essentially, scenario planning guides CPG companies through market unpredictability, leading to more efficient and profitable trade promotion strategies.

Although we are becoming increasingly reliant on AI in many areas of our business, it's important to remember that the human touch remains crucial for effective trade promotions. Let's explore scenario planning and explain why an experienced team continues to be important for trade promotion success.

The role of AI and ML in enhancing scenario planning

The use of AI and ML is changing how CPG companies plan their strategies. At CPGvision, we utilize these technologies to upgrade scenario planning from a manual, guesswork-based approach to one that's data-driven and predictive.

Understanding AI and ML in scenario planning

AI and ML play a key role in improving scenario planning. They analyze large sets of data, identify trends and patterns, and use these findings to not only forecast the outcomes of different promotional strategies in varying market conditions but to generate suggestions as well.

Our method at CPGvision involves using AI and ML to process and analyze various types of data. This approach helps our AI models make accurate predictions about the performance of different promotional activities, leading to smarter decision-making.

Benefits of AI-driven planning

AI-driven scenario planning enhances the precision and efficiency of planning trade promotions. AI algorithms can sift through and interpret data much faster and more accurately than humans, resulting in stronger forecasts and strategies. In fact, according to McKinsey, businesses applying AI-driven forecasting to their supply chains can reduce errors by between 20% and 50%. This efficiency helps companies spend their trade budgets more effectively, maximizing returns on every dollar spent.

At CPGvision, we prioritize integrating a broad range of data types, including predictive baselines and uplift factors, as well as all the master data, hierarchies, financial data on funding, COGs, pricing, etc. It works by pulling it all together to generate optimal plans.

A deep dive into scenario planning features of CPGvision

Building better plans faster is our mantra and CPGvision's scenario planning tool is built to address this. It offers a range of features enabling you to utilize the vast amounts of harmonized data in our system to do just that – build better plans faster. Here's how the features of our tool facilitate this:

Advanced predictive analytics

• This feature uses historical data and current market trends to generate and predict the results of different promotional scenarios. You get side-by-side quantification of sales, revenue, and profit across an array of potential plans. With the push of a button, you activate the scenario that best meets your goals.

Robust guardrails

• For a plan to be both actionable and practical, it must abide by certain rules that you set up; these are called guardrails. A guardrail could be a minimum promoted price or a retailer margin, for example, In CPGvision, our out-of-the-box guardrails are robust, and they can also be customized to meet your requirements. This ensures that the system sends you recommendations that are both compliant and actionable.

Collaborative planning interface

• Successful trade promotion planning requires teamwork. Our tool provides a collaborative interface, enabling teams from different departments to work together as you go through the planning process. Having everyone on the same page and looking at the same numbers increases the productivity of all involved.

Machine learning-enhanced forecasts

• Our tool learns from the results of each campaign, refining its predictive models for even more accurate future forecasts. This means businesses can stay ahead, applying lessons from past promotions to improve future strategies.

User-friendly interface

• Our tool has an easy-to-use interface and dashboards that make analyzing and comparing different scenarios straightforward. 

But AI can’t do it all: The critical role of human judgment 

When it comes to business, combining human expertise with AI technology is optimal for driving success. While AI and ML significantly improve scenario planning, they can't fully replace the detailed understanding and strategic decision-making that come from human judgment. After all, not all of the information needed to accomplish the best plans is inherent in the data. People provide the necessary context, grasp subtle market nuances, and offer strategic foresight that AI can't match.

At CPGvision, we recognize the importance of this combination. Our approach merges AI's analytical power with human insights to develop more practical and realistic trade promotion strategies.

Limitations of AI

Like most tools AI and ML have limitations. AI algorithms depend on the data they're trained with and may overlook subtle aspects of human behavior and market changes. They don't fully grasp cultural subtleties, emotional influences, and unexpected market disruptions, all of which are important in the CPG industry.

Here, the value of human judgment is clear. It can address areas where AI falls short, offering insights where data is incomplete or unclear. The human capacity to understand, assess, and respond to these finer details is what elevates a strategy from good to great.

How to implement 'human in the loop' scenario planning

Implementing 'Human in the Loop' scenario planning effectively combines AI's analytical strengths with essential human judgment. At CPGvision, we've refined this approach to help CPG businesses optimize their trade promotion strategies. Here's a simple diagram illustrating how to integrate this method:

Best practices for effective integration

• Define guardrails up front: Get cross-functional alignment
• Regularly update data: Keep your data up-to-date to ensure the AI works with relevant information.
• Encourage cross-functional collaboration: Get different departments involved in the planning process. Varied viewpoints improve the quality of human input.
• Embrace experimentation: Be open to trying unconventional scenarios. AI can uncover opportunities that might be missed by traditional methods.
• Learn and adapt: Treat each scenario planning cycle as a learning experience. Review the results of implemented scenarios to improve future plans.
• Balance AI and human input: Use AI for insights, but don't let it override human decision-making. Find a balance where AI informs but doesn't dominate decisions.

Following these steps and best practices will make 'Human in the Loop' scenario planning a key part of your trade promotion strategy. With CPGvision, you get the tools to leverage AI while ensuring human expertise remains central, guaranteeing that your trade promotions are data-informed and attuned to your business objectives.

How to build a business case to implement CPGvision in your business

When you're thinking about adding CPGvision to your business, it's important to build a clear business case. This means showing the real benefits and return on investment (ROI) that CPGvision can bring, especially in scenario planning. Here's a straightforward way to do this:

A McKinsey & Company study shows that using AI and ML in trade promotions optimization leads to notable improvements:

• A 15-20% increase in promotional efficiency
• A 25-30% reduction in excess inventory
• A 10-15% increase in sales

These figures strongly support the effectiveness of AI and ML in improving trade promotion strategies. By including this data, you can highlight the potential ROI and operational benefits that CPGvision could offer your business.

First, pinpoint the exact problems you're facing in managing trade promotions. Clearly identifying these issues will help you show how CPGvision can solve them.

Focus on the main features of CPGvision that meet your challenges.

Use our ROI calculator to clearly outline the financial gains you can expect from using CPGvision. This tool will help you quantify the ROI, providing solid figures to present to stakeholders about the financial benefits of CPGvision.

Include examples or testimonials from companies that have successfully used CPGvision. Showing how it has improved efficiency, boosted sales, and increased ROI can be very convincing for decision-makers.

Ease any concerns about getting started by explaining the straightforward integration of our system with your existing setups. We provide continuous support to ensure a smooth transition and sustained success. For more detailed information, visit our implementation resources page at CPGvision Trade Promotion Management Resources.

By following these steps and focusing on the specific advantages of CPGvision, you can build a convincing case.

Experience AI and human-powered scenario planning with CPGvision

As we wrap up our discussion, it's clear how important human judgment is when it comes to scenario planning. CPGvision is at the forefront of this, effectively merging AI and ML's analytical capabilities with the critical insights provided by human expertise. This approach leads to trade promotion strategies that are not just driven by data but are also finely tuned to market realities.

Ready to upgrade your trade promotion strategies with the power of AI and human expertise? Get in touch with us to discover more about CPGvision and start your journey towards smarter, more effective trade promotion planning.